The California Supreme Court on July 18 unanimously sided with the Civil Justice Association of California's amicus curiae position and unanimously upheld an agreement to arbitrate disputes in an insurance contract.  The decision overturned a 6th District Court of Appeal ruling that the arbitration clause was unconscionable.  The court of appeal based its decision on the arbitration agreement providing that the insured and the insurer each would share the cost of arbitration.  The lower court also found that a “service of suit” clause, governing where the contracting parties agree to submit to jurisdiction, created an ambiguity that required ruling against the insurer.

 

The Supreme Court, in an opinion (Boghos v. Lloyd’s of London, S117735)  authored by Justice Kathryn M. Werdegar, did not agree with either basis.  The Court saw no ambiguity and, regarding cost sharing, found that the court of appeal should not have relied on the landmark 2000 Armendariz v. Foundation Health decision which dealt with employer-mandated arbitration clauses covering statutory and constitutional claims by employees.  Justice Werdegar observed that, “While the business of insurance is sufficiently affected with a public interest to justify its regulation by the state…, the fact of regulation does not suffice to demonstrate that any given insurance-related claim entails an unwaivable statutory right, or that any given claim seeks to enforce public policy articulated in a statute.”

 

The opinion is a setback for those who persistently attack the right of persons to freely and fairly contract with one another, especially on how they want to handle possible future disputes.  Arrayed against CJAC (the sole association amici supporting the appellant Lloyd’s) in this case were groups such as the Consumer Attorneys of California, Public Citizen Litigation Group, and Trial Lawyers for Public Justice. (Boghos v. Lloyd’s of London, 7/18/05, S117735) 

 

 

John H. Sullivan

 

President

 

Civil Justice Association of California

 

Co-Chair

 

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